The closest thing to the crypto market in the world of traditional finance is a fundamental analysis procedure of a start-up. Technical analysts use technical indicators to study and analyze historical data about the price of an asset and other market movements to determine favorable entry and exit points for trades. Technical analysis describes the analysis of historical price and volume trends to predict future movements in asset prices. The three most fundamental metrics for the fundamental analysis of a cryptocurrency are hash rate, status, and active addresses, as well as transaction values and fees. If you can use technical analysis to correctly detect these price movements, you can get great returns.
Most traders and investors probably agree that both FA and TA are valuable in their own way. So instead of relying on one or the other, a contextualized and balanced use of the two sounds more reasonable. Fundamental analysis is used by investors to determine the “intrinsic technical analysis value” of a crypto asset or project. Its main goal is to examine a variety of internal and external factors to determine whether a crypto asset or business is overvalued or undervalued. Investors can use that information to strategically execute positions in or out.
Fundamental analysis allows both non-technical investors and experienced traders to trade with confidence in market movements in the crypto world. Long-term traders can develop more informed strategies with a higher chance of success by using fundamental analysis. Trend lines are one of the basic techniques that most investors and traders use to identify trends on price charts. A trend line is basically a line that connects different points of high or low prices.
To determine the value of an asset, fundamental analysts analyze macro- and microeconomic trends, industrial conditions, and the competitive landscape. Technical analysts, on the other hand, try to understand market sentiment by looking for patterns and predicting trends and price movements by examining historical data such as price and volume. As you can see, fundamental and technical analysis can also be applied to the crypto market, although with some quirks. Before investing in a currency, you should do a fundamental analysis and find out if the currency has growth prospects or if it is overvalued.
Others use complex pricing patterns and analysis frameworks such as Elliott Waves and Market Profile. While fundamental analysis looks for a bigger picture around the price of an asset, taking into account as many influential factors as possible, the TA focuses strictly on historical market data and market charts. While FA tries to determine the true value of a trading asset, TA is used as a tool to predict price action based on trading volume and past trends.